Fact Check: “Reasonable Pricing” Policies Do Not Promote Innovation


During the NIH’s virtual workshop on July 31, Knowledge Ecology International’s (KEI) James Love claimed that the “reasonable pricing” provision required by the NIH in its Cooperative Research and Development Agreements (CRADAs) from 1989-1995 did not harm — but rather stimulated — the rate of biomedical research and discovery. Love stated, “You actually were often higher in the number of CRADAs issued when the reasonable pricing clause was around than you were after [it was removed].”


From 1989 to 1995, while the NIH’s “reasonable pricing” clause was in effect, the number of new CRADAs issued annually was lower than in the years immediately before and after its implementation. In fact, in just the five years following the clause’s removal, four times as many CRADAs were issued compared to the six years it was in place.

The NIH ultimately repealed the clause because of the chilling effect on technology transfer. Indeed, when announcing the removal in 1995, NIH Director Harold Varmus stated that “An extensive review of this matter over the past year indicated that the pricing clause has driven industry away from potentially beneficial scientific collaborations with PHS [Public Health service] scientists without providing an offsetting benefit to the public.”

Strong patent rights serve as a crucial incentive for innovation in the biomedical sector. The implementation of “reasonable pricing” policies can undermine this incentive. The decline in CRADAs during the period the NIH implemented such policies, followed by a significant increase after their removal, are a testament to this fact.

Bottom Line

This claim is false.

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